Choose Your Bank Wisely
Federal banking institutions will not take on cannabis clients. The compliance burden is too large and they do not want to risk their FDIC insurance.
Rather than wasting your time at a federal bank, meet with local community banks, regional banks, and credit unions to see how they can help. These banks have the resources to maintain the proper due diligence and compliance and have much to gain with cannabis clients.
Here are a few additional strategies that can improve your chances of establishing a bank account for your business.
Use a Simple Business Name When Filing Your Articles of Incorporation
This document is what proves the existence of your company from a legal standpoint. It is also the document banks review while they consider giving your business a bank account. A name that obviously references cannabis can raise red flags and cause unwanted attention. Instead, select a more discreet business name. You can use a general name or your initials followed by Corporation, Limited, Group, Company, or similar. Conservatism and professionalism go a long way in the eyes of bankers.
Create Two Distinct Bank Accounts
Once approved by your bank of choice, make sure to set up one account strictly for cash deposits and the second account for paying business expenses. This will help mitigate the chance of having a Suspicious Activity Report (SAR) filed or getting your account frozen. This report or freeze can occur in the first account because of the large volume of cash activity. Having a second account is a good business practice. It allows you to keep paying your bills and taxes on time while you work to manage affairs with your primary account.
If a SAR or freeze is issued, it is advised to have all your financial documentation, city and state permits, licenses, and expense reports in order. Having this documentation organized and accurate can help your business maintain its status as an account holder.
Another possible scenario after opening your business bank account is getting audited. This is another good reason to make sure your bookkeeping is solid and your metrics and compliance are in place. This is no easy task, yet something that needs to remain impeccable. Having a team of specialized cannabis accountants and financial consultants on your side is essential to the status of your bank accounts and the overall viability of your company.
Develop Good Rapport With Your Banker
Try to consider your banker a friend or an ally, as opposed to a business transaction. This can pay back in dividends down the road and might even reduce the possibility of a SAR getting filed on your accounts. Be as courteous, friendly, transparent, and professional with your banker as possible. A little bit of effort goes a long way.